Information and Advice on the NZ Sharemarket from Securities Research Company's . Market Analysis Issue No. 351 P.O. Box 34-162, Auckland September 11, 2001. Inside Market Analysis BUY Commander Communications .................... 10-12 Company Review: We sold for a 603% gain, but ERG shares have since plunged in value ........... 14-16 Richina Pacific upgraded to “Buy” ............................. 5 Update: Scientific Services...................................... 16 Steel & Tube raises dividend 33%............................. 6 Toll Holdings, Lang Corporation bid for Rail .............. 9 Neglect Ratings of NZ and Australian Shares ......... 17 Editor and Research Director: James R Cornell (B.Com.) Summary and Recommended Investment Strategy. World stockmarkets fell sharply last week - dragging Australia and NZ lower. A further interest rate cut by the US Federal Reserve has highlighted continued weakness in the US economy, but will eventually lead to a moderate economic recovery. We are re-investing a little more of our cash reserve. Investment Outlook. On August 21, the US Federal Reserve made their growth companies to our portfolio. We are therefore seventh consecutive cut in interest rates. Rates were using another 2-5% of our cash reserve to buy shares in cut ¼% to 3½% - down from 6½ at the start of this Commander Communications. calendar year. The US stockmarket - and other major stockmarkets - have responded by plunging sharply to new lows! Investors could be mistaken for thinking falling interest rates are unfavourable for share prices! In fact, stockmarkets (i.e. investors) often act irrationally - especially in the short to medium term. Investors have seen six previous interest rate cuts this year while US New Zealand share prices have fallen. The latest cut is therefore seen NZSE 40 Index as a sign that the US economy is still too weak - which is unfavourable for the stockmarket, so prices fell. As always, success in the stockmarket requires looking past the current situation and focusing on the future. The economic and stockmarket situation will always look “good” at the top of the cycle and “bad” near the bottom. Need we remind investors of the widely perceived “good” outlook for Investment and Property shares in 1987, Gold Mining shares in 1994/95 or Technology shares just 18 months ago? The world economy will probably start to recover, New Zealand For All Shares albeit only slowly, from the first quarter of 2002. Total Return Index Stockmarkets anticipate economic changes, so world stockmarkets will probably form their lows over the last quarter of this year (i.e. September to December). So expect a little more weakness - perhaps a couple of selling panics? - in the immediate future, then a gentle recovery next year. Our Forecasts for the Australian and New Zealand stockmarkets have weakened slightly to Neutral levels. Our One-Year Forecast for Australia is a 55% chance that prices will rise. In NZ is it 59%. Our Short Term Trend Model for NZ is also Neutral at 43%. Australia All Ords Index Despite weak markets, we remain happy with our Recommended Investments and see opportunities developing to add depressed cyclical issues and emerging Page 2 Market Analysis Performance Forecasts "Performance Forecasts" are computer generated predictions of the relative future price performance of a company's shares over the next three to six months. Performance Forecasts are calculated for every listed NZ share (except Investment Trusts) on a rating scale using the letters "A" (Highest potential for capital appreciation over the next 3-6 months ), "B" (Above Average), "C" (Average), "D" (Below Average) and "E" (Lowest). These predictions are NOT buy or sell recommendations, but can be useful to help time planned purchases or sales, or to identify shares worthy of further study and analysis. Performance Price/Sales P/E Gross Performance Price/Sales P/E Gross Performance Price/Sales P/E Gross Forecast Price Ratio Ratio Yield Forecast Price Ratio Ratio Yield Forecast Price Ratio Ratio Yield A. Barnett Ltd C 83 0.44 18 Nil Frucor Bev. C 170 0.93 18 7.0 Powerco Limited C 173 0.61 NE Nil AMP Limited B 2270 0.73 17 2.5 GDC Communicat. C 199 1.81 25 2.4 Property F Ind. D 83 7.72 38 8.3 AMP NZ Office C 83 6.11 10 8.6 Genesis Res. D 351 3.10 NE Nil Pure NZ Limited D 11 4.57 NE Nil AQL Holdings E 1.2 0.54 NE Nil Goodman Fielder C 155 0.47 11 6.5 Reid Farmers B 123 0.64 9 8.5 AXA Asia Pac. B 322 0.54 12 3.7 Grocorp Pacific D 11 0.36 NE Nil Renaissance D 52 0.12 14 5.7 Advantage Group D 46 0.41 37 Nil Guiness Peat B 169 2.96 16 1.8 Restaurant Brds B 160 0.62 12 9.3 Affco Holdings E 32 0.07 6 Nil Hallenstein G. B 274 0.98 14 10.1 RetailX Limited E 20 N/A NE Nil Air New Zealand C 70 0.11 2 21.4 Hellaby Hold. B 204 0.40 9 10.2 Richina Pacific C 75 0.07 12 Nil Akd Int Airport B 380 9.44 27 4.4 Heritage Mining* N/R 5.0 4.20 NE Nil Richmond Hold. D 258 N/A NE Nil Apple Fields C 15 0.24 NE Nil Horizon Energy A 1135 2.35 11 11.2 Rocom Wireless E 41 N/A NE Nil Baycorp Hold B 1260 N/A 53 2.7 IT Capital Ltd D 9.0 1.15 NE Nil Rubicon Limited C 72 0.10 NE Nil Beauty Direct C 11 4.17 NE Nil Ind Newspapers B 335 2.62 52 3.8 Ryman Health. C 206 3.45 15 2.7 Bendon Limited B 185 0.68 17 7.3 Infratil NZ B 166 3.87 19 6.3 Sanford Limited B 650 1.76 13 4.6 Blis Technology E 80 N/A NE Nil Kingsgate Int’l C 13 0.43 3 Nil Savoy Equities D 17 0.63 NE Nil Brierley Invest E 58 0.50 NE Nil Kirkcaldie & St C 458 N/A NE Nil Scott Tech. Ltd B 134 0.86 7 12.3 Broadway Ind C 35 0.19 10 Nil Kiwi Property C 93 5.31 8 11.2 Seafresh Fish. E 4.2 0.25 NE Nil CACI Group Ltd C 44 N/A NE Nil Lion Nathan Ltd A 555 1.42 18 3.3 Selector Group C 3.2 4.71 NE Nil CDL Hotel NZ D 19 0.27 46 5.5 Lyttelton Port B 170 2.97 13 9.0 Shotover Jet D 52 0.90 10 Nil CDL Investments E 18 1.27 8 13.1 Mainfreight Grp C 128 0.23 27 7.6 Sky City Ltd A 1135 2.57 17 8.3 Cabletalk Group C 70 N/A NE Nil Medical Care E 127 N/A 81 Nil Sky Network TV D 355 4.60 NE Nil Cadmus Tech Ltd D 15 N/A NE Nil Metro. LifeCare D 114 0.82 26 Nil Software of Exc C 206 1.10 NE Nil Calan Hlthcare C 81 6.57 12 8.4 Michael Hill B 440 0.90 17 5.1 South Port NZ B 129 2.64 15 6.9 Cap Properties C 89 N/A 8 13.1 Mid-Cap Index * N/R 198 N/A NE Nil Southern Cap D 81 8.66 NE Nil Carter Holt C 169 0.77 11 3.6 Montana Group C 474 3.29 39 Nil Spectrum Res. D 2.8 2.14 NE Nil Cavalier Corp A 560 0.93 14 8.5 Mooring Systems C 130 N/A NE Nil Steel & Tube A 197 0.44 12 12.1 Cedenco Foods A 195 2.38 11 Nil Mowbray Collect C 62 N/A NE Nil Strathmore Grp C 7.3 1.54 NE Nil Col FS Property C 106 6.88 12 10.1 Mr Chips Hold B 130 1.19 19 7.5 Submarines Aust C 39 0.18 NE Nil Col Motor Co B 285 0.23 16 7.3 NZ Experience D 10 0.80 31 Nil Summit Gold Ltd*N/R 19 N/A NE Nil Commsoft Group C 9.0 N/A NE Nil NZ Invest Trust* N/R 495 N/A NE 1.7 Tag Pacific Ltd D 15 0.29 NE Nil Compass Com. D 32 N/A NE Nil NZ Oil and Gas * N/R 36 2.29 NE Nil Tasman Agric. C 175 3.07 NE Nil Contact Energy B 329 2.29 32 7.9 NZ Refining Co A 1495 1.21 5 25.0 Taylors Grp Ltd B 125 0.68 10 8.4 Cube Capital D 40 0.36 31 Nil NZIJ.co.nz D 32 N/A NE Nil TeNZ * N/R 86 N/A NE Nil Cue Energy Ltd * N/R 7.1 2.46 NE Nil Nat Property Tr C 90 6.81 15 10.2 Telecom Corp B 472 1.55 10 6.3 DB Group B 510 0.64 14 4.7 National Mail D 6.5 0.71 NE Nil Tourism Hold. B 151 0.68 11 8.9 Dairy Brands C 73 3.35 13 Nil Natural Gas D 98 0.61 77 4.6 Tower Limited C 516 0.53 11 5.8 Design Textiles C 35 0.18 11 8.5 Newcall Group D 4.0 0.25 NE Nil Trans-Tasman E 18 1.00 5 Nil Dorchester Pac B 119 0.86 9 7.5 Newmarket Prop.